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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. AVC = TVC/Q
Normal Profit
Producer surplus
Private goods
Average Variable Cost (AVC)
2. Models where firms agree to mutually improve their situation
Collusive oligopoly
Complementary Goods
Cartel
Normal Goods
3. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Economic Growth
Long Run
Marginal tax rate
Relative Prices
4. When firms focus their resources on production of goods for which they have comparative advantage
Market Equilibrium
Market power
Allocative Efficiency
Specialization
5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Perfect competition
Normal Profit
Average Variable Cost (AVC)
Profit Maximizing Rule
6. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Marginal Benefit (MB)
Production function
Positive externality
Subsidy
7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Price Ceiling
Determinants of Labor Demand
Profit Maximizing Resource Employment
Total Fixed Costs (TFC)
8. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Negative externality
Total Fixed Costs (TFC)
Price Ceiling
Monopolistic competition long-run equilibrium
9. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Average Total Cost (ATC)
Luxury
Total variable costs (TVC)
10. The most desirable alternative given up as the result of a decision
Allocative Efficiency
Public goods
Total Welfare
Opportunity Cost
11. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Public goods
Natural Monopoly
Opportunity Cost
Average Product of Labor (APL)
12. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Price discrimination
Price inelastic demand
Short run
Producer surplus
13. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Free-Rider Problem
Allocative Efficiency
Average Total Cost (ATC)
Absolute prices
14. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Private goods
Resources
Perfectly competitive long-run equilibrium
Price Elasticity of Supply
15. The output where ATC is minimized and economic profit is zero
Price Elasticity of Supply
Derived Demand
Normal Profit
Break-even Point
16. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Market Economy (Capitalism)
Demand for Labor
Spillover costs
Consumer surplus
17. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Incidence of Tax
Shortage
Substitution Effect
Shutdown Point
18. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Total Revenue Test
Complementary Goods
Productive Efficiency
Producer surplus
19. Exists at the point where the quantity supplied equals the quantity demanded
Total Welfare
Cartel
Price Ceiling
Market Equilibrium
20. The imbalance between limited productive resources and unlimited human wants
Productive Efficiency
Monopolistic competition long-run equilibrium
Scarcity
Collusive oligopoly
21. Ed > 1 - meaning consumers are price sensitive
Price elastic demand
Total Revenue
Least-Cost Rule
Economic Growth
22. 0 < Ei < 1
Economic Growth
Total Fixed Costs (TFC)
Absolute prices
Necessity
23. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Price floor
Shutdown Point
Perfectly inelastic
Consumer surplus
24. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Implicit costs
Specialization
Price discrimination
Perfect competition
25. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Four-firm concentration ratio
Marginal Productivity Theory
Marginal Resource Cost (MRC)
Price floor
26. The additional cost incurred from the consumption of the next unit of a good or a service
Producer surplus
Marginal Cost (MC)
Consumer surplus
Total Welfare
27. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Law of Increasing Costs
Perfectly competitive long-run equilibrium
Marginal tax rate
Marginal Resource Cost (MRC)
28. Ed < 1
Explicit costs
Price inelastic demand
Average Product of Labor (APL)
Break-even Point
29. The difference between total revenue and total explicit costs
Accounting Profit
Four-firm concentration ratio
Market Equilibrium
Spillover benefits
30. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Normal Goods
Spillover benefits
Fixed inputs
Luxury
31. The total quantity - or total output of a good produced at each quantity of labor employed
Break-even Point
Monopoly
Excise Tax
Total Product of Labor (TPL)
32. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Absolute Advantage
Marginal Revenue Product (MRP)
Perfectly inelastic
Determinants of Supply
33. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Excise Tax
Price inelastic demand
Determinants of Supply
Marginal Benefit (MB)
34. Product demand - productivity - prices of other resources - and complementary resources
Determinants of Labor Demand
Luxury
Diseconomies of Scale
Profit Maximizing Resource Employment
35. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Four-firm concentration ratio
Marginal Productivity Theory
Natural Monopoly
36. The sum of consumer surplus and producer surplus
Price Elasticity of Supply
Specialization
Monopoly
Total Welfare
37. Exists if a producer can produce a good at lower opportunity cost than all other producers
Spillover benefits
Monopolistic competition long-run equilibrium
Comparative Advantage
Price discrimination
38. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Allocative Efficiency
Substitute Goods
Total Fixed Costs (TFC)
39. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Economics
Absolute Advantage
Economies of Scale
Monopoly long-run equilibrium
40. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Normal Goods
Shutdown Point
Perfect competition
Price discrimination
41. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Spillover costs
Spillover benefits
Demand for Labor
Absolute prices
42. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Constant cost industry
Total Product of Labor (TPL)
Absolute prices
Economic Growth
43. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Least-Cost Rule
Private goods
Monopsonist
Marginal Productivity Theory
44. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Determinants of Labor Demand
Production function
Total Revenue Test
Necessity
45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Monopsonist
Non-collusive oligopoly
Four-firm concentration ratio
46. The marginal utility from consumption of more and more of that item falls over time
Law of Diminishing Marginal Utility
Surplus
Price elastic demand
Perfectly elastic
47. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Total Revenue
Resources
Constant cost industry
Necessity
48. A good for which higher income increases demand
Dead Weight Loss
Average Total Cost (ATC)
Marginal Resource Cost (MRC)
Normal Goods
49. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Total Welfare
Law of Demand
Scarcity
Law of Supply
50. Costs that change with the level of output. If output is zero - so are TVCs.
Constant cost industry
Marginal Productivity Theory
Total variable costs (TVC)
Complementary Goods